A List - AAPL, AMZN, AMAT, BIIB, BIDU, CELG, CMI, CROX, FFIV, FSLR, IBM, VSEA;
C List - AKAM, CAL, JOYG, MNST, NTAP, NTRI
My trading plan for the open was to concentrate on the A and C List stocks. I was looking for gap downs below Friday's low from the A list and gap ups or signals of strength from the C list.
Three stocks met the gap criteria - BIIB, and IBM gapped down below Friday's low and MNST gapped up above Friday's high. While I was waiting for the gappers to develop on the 15 minute timeframe, I looked to see if I could find some orderly setups from the other names on the list.
JOYG was carving out a bullish rounded bottom with good volume, so I decided to go long on a break of the ORH. Here is the 3 minute chart of my entry and exit.
Getting back to the gappers, IBM moved too quickly and did not meet my criteria for a low risk entry. MNST was just plain ugly. BIIB set up a nice inside bar just below the down sloping 5 period ema. The target was the 38% Fibonacci extension of the previous day high to the ORL. The entry bar was WR and closed near its low which for me, is a true indicator of the potential for success.
In the afternoon, the market started to show a little more promise so I scoured the watchlist for some B&B patterns. I love rounded bottoms because they impy that demand is greater than supply. Every time sellers try to push price lower, buyers step in creating a rounded base.
FSLR made a beautiful rounded bottom with a few NR bars just before the break - price/volume contraction before expansion.
We'll look at the B List on another day. Categorizing the watch list makes it easier to work with during the trading day, but its much more work to maintain the list. For example, at the end of the day, some B list names have to be transferred to the A List and JOYG has recaptured its 200 DMA.
8 comments:
This is what hardwork is all about.
Hardwork = Big paid everyday.
Great trades. For me, yoyo day is just for me to watch and learn from the master.
Thanks.
Jamie,
Great way of categorizing your watchlist. Learn new tricks from you again. Thanks!
Btw, for BIIB trade, your entry was quite close to ORL. Does that make it higher risk?
Zen
Thanks Jerry,
The futures were so choppy in pre-market that I knew I had to focus on a very short list otherwise I would get chopped up too.
Thanks Zen,
The BIIB setup was a little choppier than I like but the upper shadows on the 3rd and 4th candles plus the inside bar sold me on the setup.
Initially, I pondered waiting for a break of the ORL and realized that it had already been severely breached on the second and third bars and was no longer relevant to the setup. A minor breach on one bar is negligible but in this case I felt that it would at least test the second bar low which fell near a round $ number.
A more symmetrical B&B setup would have required that I wait for a break of the ORL because it was so close.
Hi Jamie,
Just wanted to thank you for all the info you share in public. You blog is my number 1 must read on daily basis (and after X farewell there is only one number 1).
Just a short question to ask: don't you want stocks of your A list to gap up above previous day high and your C list stocks to gap down below previous day low (the opposite of what you said), otherwise you'll short the strength and buy the weakness? What's the underlying reason for this?
Mark.
Thanks Mark,
Normally yes, but after last week's massive selloff, I was looking for profit taking on the stocks that are still trading at lofty levels and some bargain hunters to scoop up some of the more severely depressed stocks.That's just the way it goes, stocks can only move so far in one direction before they correct.
Hi Jamie,
Can you elaborate more on your reasoning regarding Mark’s question on strong stocks gapping down and weak gapping up? That is a very interesting theory and one that I would like to know more about. Did you anticipate a particular bias going into today’s session? Lets ay if the market continue to sell off wouldn’t the weak stocks stand a greater chance of weakness or if the market were to reverse back up wouldn’t the strong stock be the first to really? Thx Jamie.
Hi Andrew,
I was not expecting another massive selloff but I was concerned that the markets would be choppy. I used a contrarian strategy to take advantage of the oversold bias. If the markets continue to sell off all stocks are at risk of deep retracements. In the very short-term I expect a relief rally back up to the trendline.
Yesterday's strategy worked well and I will continue to apply it selectively under extreme oversold conditions.
Today I'm going to look for continuation longs in the strong stocks and some more relief for the oversold names on my watch list.
The thing about deep market retracements is that the weaker lower priced stocks eventually reach a saturation point where they don't allow for big profits intraday. BIIB, on he other hand gave me a nice move. Check out the video on the Miseducated Daytrader blog to get a better feel for what I mean.
Agreed, if this is just a normal retracement in an uptrend, it will be back to business as usual soon. But if this turns into a reversal, I will have a bias towards shorting more of the overpriced stocks.
Post a Comment